tom

🌕

[Balaji @balajis]

LIQUIDATION CONTAGION

Wealth taxes are even worse than you think. Any asset held by Californian billionaires or Dutch citizens is now at risk of experiencing forced liquidation pressure.

So: it’s not just that you don’t want to hold assets as a Dutchman. You also don’t want a Dutchman to hold your assets. Because the logic of forced liquidation is contagion.

Let’s think it through.

(1) First, suppose there is an asset with a total market cap of $10,000, with 10 shares total, of which 1 share each is held by 10 different holders, all in the Netherlands. To simplify the math, assume the Dutch holders bought those shares at par, or close to $0.

(2) Now suppose today is the unrealized cap gains tax day, and the share price is $1,000 per share. Each Dutch guy is hit with a 36% tax, and owes $360. The first guy sells his one share, gets $1,000, and pays $360 in tax while retaining $640.

(3) But the first guy’s sale reduces the market price to $960 per share. So when the second guy sells, he only retains $600 after paying $360 in tax.

(4) Now assume that by the 7th guy, all the selling has pushed the share price to collapse to $200 per share. This is a very reasonable scenario if 60% of the cap table has suddenly been dumped. Indeed it might go much lower.

(5) At $200 per share, the 7th guy actually has to go into debt to pay the tax as he owes $360. He sells his one share, pays all $200 of the proceeds in tax. And still owes $160 more in tax.

(6) The 8th, 9th, and 10th guys are even more screwed. By the time they sell, the price will likely have crashed to $100 per share or less. As with the 7th guy, even 100% liquidation will not cover their tax burden.

(7) So we immediately see many negative things about the Dutch unrealized cap gains tax bill.

(a) First, it will cause large simultaneous forced liquidations. Everyone must sell 36% of their stake near the same time.

(b) Second, it may be literally impossible to pay if a critical mass of the cap table is all subject to it at the same time. In the example above it was 100% Dutch holders, but has it been just 60% the result would have been much the same: a collapse in the share price.

(c) Third, that means it would be disastrous to have too many Dutch citizens (or Californian billionaires!) on the cap table. Their forced sales will crash your share price.

(d) So, you might have to start mass blocking those resident in wealth-taxing jurisdictions from investing in your companies.

(e) This in turn makes the poor Western European guy even poorer, as he gets locked out of high growth assets.

To be clear: I really do feel bad for the formerly Flying Dutchmen, now Crying Dutchmen. They invented much of modern capitalism. They founded New Amsterdam, now New York. They’ve punched way above their weight. I wish them only the best.

Nevertheless…they should prepare for the worst. This may be a tough century for Western Europe. The first ones out might get to freedom, while the slowest may be stuck behind a new Iron Curtain, spending a century paying off the debts their states incurred over the last century.

Because the long run fruits of Western Keynesianism are the same as Soviet Communism, in the sense of wealth seizure and pauperization.

I mean, if you knew the future, you wouldn’t want to co-own a farm with a Russian in 1916. For similar reasons, you might not want to co-own a share of stock with Dutch national in 2026. Or with anyone in a seizure-curious jurisdiction…which unfortunately includes much of Western Europe, Canada, and Blue America.

You instead want assets that are not held by those subject to forced liquidations. Now, I grant that this is an unusual way to rank assets…Dutch holders considered harmful?!? Yet it might sadly be necessary to minimize your exposure to liquidation contagion.

PS: guess which crucial stock is most held by the Dutch? ASML. So: this unrealized cap gains tax may not literally be a communist plot, but it would have the same effect.

[Navalism @NavalismHQ]

"Don’t do things that you know are morally wrong. Not because someone is watching, but because you are. Self-esteem is just the reputation that you have with yourself. You’ll always know."

@naval

[Naval @naval]

The narrative for this cycle is “this is the last cycle.”

[Naval @naval]

The beginning of memory is the end of childhood.

[219.eth @219_eth]

This CZ/FTX thing playing out in public instead of behind closed doors is the point of crypto.

[6529 @punk6529]

1/ On Making It

Are we GMI? Are we NGMI? Are we WAGMI? What does Making It mean?

I present below the 6529 GMI Framework (tm, all rights reserved, (c) 2021, 😂)

Frameworks are just a tool. None are 'right'. This is just how I think about it.

[Brian Wesbury @wesbury]

For the record: Your pizza does not cost more…Your dollar is worth less. This has nothing to do with pizzerias and everything to do with Jerome Powell and The Federal Reserve.

[Balaji @balajis]

The state can confiscate your money, Twitter can confiscate your username, YouTube can confiscate your revenue, and tech companies can lock you out of your digital life. At the press of a key.

That’s not the right balance of power. BTC/web3 shifts leverage back to individuals.

[tom @tomenswl]

@100trillionUSD Biggest risk for Bitcoin is energy crisis

[Psycho @AltcoinPsycho]

The shelf-life of blockbuster games like Halo, CoD, GTA, etc. tend to be around 2-3 years max

From an investor perspective, GameFi investments make little sense when vesting is 3-4 years anyways

IMO, some of VCs biggest losses will come from Web3 game investments

[tom @tomenswl]

@heyeaslo @NotionHQ send it

[Andrew Ruiz @then_there_was]

It never made sense to me that the creators of a successful cryptocurrency would become rich by virtue of being the first to hold it.

It makes sense for a business and the risks they take, but currency should be neutral; its value stemming from goods, services, and labor.

[⚡️🌙 @dystopiabreaker]

all sums are zero. no new wealth. only stagnation and a brutal fight to increase your wealth at the cost of others. entropy be my god, death be my light, praise the dying of the light

[⚡️🌙 @dystopiabreaker]

you gotta be shorting electric car, rocket, crypto, AI, and fusion energy companies. you gotta be calling tech a bubble every year. you gotta be advocating degrowth. you gotta be warning about population growth. you gotta be banning general purpose computation

[⚡️🌙 @dystopiabreaker]

you gotta be rentseek maxing. you gotta be buying commercial real estate. you gotta be providing nothing of economic value while benefiting from the work an innovation of others. you gotta be calling bitcoin rat poison. you gotta be dumping gigatons of sugar into american bloodst

[tom @tomenswl]

@KelloggKellogg9 $LUNA was also at ±200 mil mc August 2020. $COTI sits at ±500 mil now. For COTI to have the same run you are comparing it would have to reach almost 44 billion mc - more than twice of LUNA today.

[CZ 🔶 BNB @cz_binance]

I asked the waiter for the bill, he asked me back: which coin?

[Balaji @balajis]

From state-controlled media to state-controlled social media.

[Dmitriy Molla @DmitriyMolla]

Everyone keeps complaining about exploding real estate prices. I’m not sure what they’re talking about. Last year, the average US house cost about 39 Bitcoin. Today it’s only 6.5 Bitcoin. Next year, my guess is it will be about 2 Bitcoin. Sounds like deflation to me.